How to Pay off Credit Card Debt

Ways to pay off credit card debts.

Sometimes it can feel like you pay every month but don’t see the balance dropping as fast as you might expect. We’re here to help with some tips about how to pay off credit card debts.

Limit credit card use.

If you have only one card, try to limit your use. If you have more than one card, pick a card to stop using. Paying off credit cards can be difficult if you don’t control your spending. When you use a credit card, you’re not just paying for the item you purchase, but you’re also paying interest in the form of APR. What is APR? It stands for annual percentage rate. It’s the periodic interest that is charged when you use your card. The APR can vary from card to card.

It may be hard in the beginning to control your spending, but every time you don’t make a purchase, you’re making progress toward your goal.

Use a card with no balance for normal purchases.

Sometimes we use credit cards to earn the points or perks associated with the card, or we want the convenience and security of only carrying one card with us. If you have a card with no balance, use that for your normal purchases and then pay it off at the end of the week or before any grace period ends.

In some cases, if you pay off the debt before the grace period ends, you are not charged interest on that purchase. If you make sure you pay off your balance within the grace period, then you’re not paying interest on the purchase. Check your credit card statement or terms and conditions to find out whether you have a grace period and when it ends.

Budget more for paying off debt.

Learn how to make a household budget. Make a budget and stick to it. It’s tough at first, but following a budget helps work on your fiscal discipline. When you set up your budget, factor in paying off your credit card debt. It can be harder to make debt go away without a plan. Plan to pay more than the minimum payment. Even if you limit your card use, it may take more time than you realize to pay off a credit card by only making minimum payments. You need to budget for an aggressive repayment plan.

Make extra payments with any disposable income.

After you create your household budget, use your budget surplus to make additional payments on your credit card. Did you get a tax return or earn a bonus at work? Put it toward your credit card debt. It’s tempting to use that money for something else, but paying off debt now means you can have more disposable income later.

Sometimes people think it’s better to put disposable income into savings than to put it toward debt. We have a Debt Payment vs Savings Investment Calculator to help you decide which option is the best for you. This way you can see numbers that are customized for your debt.

Pay the highest-interest debts first.

Look at your credit card statements and write down the remaining balance and the interest rate. Rank them according to the interest rate. Prioritize paying off high-interest debt first and then move on to the next highest. This could benefit you the most in the long-term.

If you have multiple cards with the same APR, look at the balance. Some people like to pay off the smallest balances first. This is the “snowball” way of paying off debt. As you knock out smaller balances, it frees up more money to be applied toward higher balances. Seeing the balances drop is a real motivator to keep going. Other people like to take the opposite approach. They focus their efforts on the highest balance first and then tackle the smaller balances.

It’s up to you on how you want to tackle paying off your debt. Will reaching a series of smaller goals give you a better sense of accomplishment or do you want to knock out the largest debt first? As long as you’re making progress, you’ll end up in a better financial position in the end.

Pay as often as possible.

Get in the habit of checking your credit card balance online every week. If you wait for your monthly statement, you may be surprised by a recurring charge. Streaming subscriptions and monthly shipments of pet food are handy, but they can rack up the balance on your credit card. If you check your balance every week, then you can see when these charges hit. Add up all the charges that hit your card each week and send a payment. Even if it’s just $10, you’re paying it during your grace period. That means you’re paying it before interest is added to the debt. Of course, you should check your credit card statement and terms and conditions to find out whether you have a grace period and how it works.

Even if you aren’t paid weekly, you should still check the activity on your credit card account. Maybe you can’t make a payment that week and it will need to wait until your next payday, but you’ll know what’s on the card. Paying weekly typically is better than paying twice a month. Paying twice a month typically is better than paying once a month. Any time you can pay a little extra or pay before interest hits, you’re helping yourself.

Consider 0% balance transfer offers.

If you have several cards or really high interest, consider transferring the balance to a credit card that provides for zero interest on balance transfers for a period of time. It seems counterintuitive to recommend getting another credit card to help pay off credit card debt, but using a card with an introductory or promotional period of zero interest for balance transfers might help. Consider taking advantage of this. That will give you some time to focus on paying off your balance without interest being added every month. That might really help and add up to a lot of savings. The key with this step is to not generate more debt while doing it. You should examine the terms and conditions of the balance transfer offer to make sure that your interest savings are not outweighed by any balance transfer or other fees.

Before you apply for a balance transfer offer, create a plan that will pay off the balance before the promotional period runs out. Only use that card for the balance transfer. Don’t carry it in your wallet. Do not put purchases on that card. This tactic takes fiscal discipline, but you’ll appreciate it when you’re debt free.

Consolidate credit card debt with a consolidation loan.

If you have multiple cards and you feel like your payments aren’t making much of a dent in the debt because you have so many of them, consider applying for a consolidation loan. Consolidation loans gather your debt into one loan where the interest rates may be lower than the original rates on the cards. This allows you to make one payment instead of juggling multiple accounts and payments. If you own a home, you may want to use our Home Equity Loan Calculator to see if this option could save you money. You should examine the terms and conditions of the consolidation loan to make sure that your interest savings are not outweighed by any fees.